January, 2012:

Behind in Your House Payments? Sell.

Jan 31st, 2012
by Doug Jacobs.
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Can't pay the mortgage? Sell

Earlier, I wrote an article about five things that can be done if you get behind on your house payments. I promised to take each suggestion in turn, and elaborate on the general process.

The first suggestion was to sell your house.

This of course is easier said than done as the economy is in such a state that few houses are actually selling. Nonetheless – it does happen.

Here’s how to get started in the right direction:

Step one: accurately analyze the value of your home. This can be done on-line, but it is generally a better idea to have a realtor give you a realistic value.  Your home is compared to others that have sold on the market, and an analysis of the price your home should get can be computed.  This is called a CMA – a Current Market Analysis.  It’s a lot less expensive than a full appraisal and usually quite a bit quicker.

Step two: talk to a realtor or professional about how to make your house desirable to a prospective buyer. Sometimes a new paint job and a little landscaping can dramatically raise a home’s value.  Even inexpensive manual labor can greatly enhance a home’s appeal.

Step three: hire a good realtor to help with the process. Find someone that is honest and straightforward, and won’t lead you down an expensive repair path or promise an unrealistic price.  This will cost a percentage of your proceeds; but the service provided to help you prepare the house, show it, and talk to other realtors is, in my opinion, well worth it.

Step four: be patient.  It’s a buyer’s market so be prepared for the process to take some time.   Lower the price if you have too and can afford it and be ready to negotiate when a buyer comes along.

 

image credit: ejhogbin

Four Dynamite Don’ts for Troubled Home Loans

Jan 28th, 2012
by Cathy Moran.
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Worthless Ideas For Saving Your HomeWhen you’re trying to save your home, just as important as a to-do list  is a list of Don’ts.

Bill Purdy, a law professor and Santa Cruz County real estate  lawyer, is my go-to guy for mortgage and foreclosure issues.  Here’s his  list of worthless ideas  for saving your home.

Today just about everyone knows someone who’s experiencing problems with one or more of their mortgages.  We’ve counseled thousands of borrowers in the last 7 years.

As a result, we’ve identified a series of recurrent themes that lend themselves to a list.  They are in no particular order,  save all of them come up extremely frequently. So here they are with no further ado.

1. The bank needs to show me my note-

Forget about this one. Typically you’ll need to pay about $100,000 in attorney’s fees just to get the bank into court.

In California the attorneys for the bank will eventually show up and produce a note. It may not be much of a note, but they’ll find one. Or make one.

Whatever they do produce, regardless of its condition or legal sufficiency, California courts have shown themselves to be slavishly attendant to every whim of the lending industry. Nobody gets a free house. You’ll lose. It doesn’t matter what the banks and servicers did with your note, or to it. It just doesn’t matter.

2. My Loan’s Got RESPA Violations-

You’d be better off with a partridge in a pear tree, or a lovely bunch of coconuts. In fact, Truth in Lending violations would be much better.

However these days, even TILA violations have been so severely hobbled by the fawning, obsequious, toadies in the federal and state courts, that even TILA violations are almost impossible to assert and enforce in California.

RESPA or the Real Estate Settlement Procedures Act sounds like a formidable weapon a homeowner can use against lenders. It isn’t.

The few private rights of action afforded by RESPA allow the besieged property owner to collect what amount to paltry penalties. RESPA violations even if proven, will NOT stop foreclosure in California especially where the lender is using the non-judicial foreclosure route, and they almost always do.

Forget about RESPA if you are trying to stop a foreclosure. RESPA is a tiny adhesive bandage handed out by the government with great ceremony, for borrowers who’ve been gut-shot with an assault weapon.

3. I Paid My Loan Mod Specialist $______

Just fill in the blank with whatever you forked out up front. Chances are right around 100% you’ve been defrauded.

Your “specialist” is requesting the information from you, and sending it to the lender, if you are lucky. You are paying thousands for this service, simple as that.

For the record, no attorney can get you a loan modification. He or she cannot waive an imperious hand and force the banks into cowering, whimpering, docile cooperation. Neither can anyone else.

The elected officials in the federal government literally gave away 7.2 trillion taxpayer dollars to private companies in the financial industry. The banks were not required to give out a single loan modification return. Not one.

Fraud by the banks is rampant in this area. They are immune to criminal or civil prosecution for what they have done to American homeowners and continue to do. Your elected officials have seen to that.

You have no right to a loan modification whatsoever. Consult a HUD certified specialist nonprofit organization. The real good ones don’t charge a cent. Surepath Financial comes to mind (800)540-2227.

4. I Need to Do a Short Sale to Save My Credit Rating-

What a load of hooey. This might be true on certain occasions under specific circumstances. People with security clearances and those in law enforcement and fire departments come to mind. Their credit rating problems can cost then their top secret clearance or even their job.

Since most lenders and servicers fraudulently inform borrowers trying to get loan mods or obtain short sale approval that they must stop paying on their loans to even be considered, many borrowers have already had their credit pillaged by the lender by the time the short sale closes.

Short sales have their place and it’s an important one for some borrowers, especially now in California with the advent of enhanced CCP 580(e) last year.

Improved CCP 580(e) prohibits all lenders, (not just the first mortgage holder) who accept money at the short sale, from later seeking deficiencies.

Short sales are not a universal panacea for credit woes. We’re seeing borrowers who did short sales about 2 ½ years ago buying new homes now and that’s a hopeful sign. But we’re also seeing people, who filed bankruptcy 2 years ago with 725 credit ratings today.

So there you have Bill’s  list of  worthless diversions in the mortgage morass.   That’s straight talk from an expert.  Take it to heart.

Image: © Tom Bayer – Fotolia.com

Is Your Lender Picking Your Pocket?

Jan 23rd, 2012
by Cathy Moran.
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Banks Pick Homeowner's Pockets With Insurance

Banks Pick Homeowner's Pockets With InsuranceForce-placed insurance on your home protects only the lender, not you.

Please repeat:  force-placed insurance protects only the lender, not you.

When the mortgage company buys the insurance on your home, you lose.

Every mortgage or deed of trust requires that the borrower have insurance to protect the structure in case of fire or other casualty.

It assures the lender that if disaster strikes, there is protection for its investment in your home.

If you let that insurance lapse, the lender can and will obtain coverage on the property, and add the cost of the policy to the loan.

I can’t tell you how often my clients assure me that the lender has insured their home, believing that they are covered.

Whoa!  What the lender has insured is the lender’s interest in the home.  The policy is only large enough to protect the bank;  the bank is not buying a policy large enough to cover your interest in the home.

What’s covered

Suppose that you have a $200,000 loan on a piece of realty that’s worth $500,000.  If you let your coverage lapse, the bank will get insurance with $200,000 in coverage.  Your $300,000 interest in the property is uninsured.  The bank doesn’t care if you suffer a loss when there’s a catastrophe;  it goes out of pocket only enough to protect its exposure.

The “out-of-pocket” phrase brings up another issue.  Force-placed insurance is notorious expensive, two, three or four times as expensive as a policy the homeowner can buy to protect the entire value of the house and provide for other insurance protections from liability.  The suspicion for years has been that the price of force placed insurance is inflated because the lender either owns the insurer who writes the policy, or has a kick back arrangement with them.

The inflated cost of this insurance gets added to the loan balance, and, in the end, added to the lender’s profits on the deal.

The New York state Department of Financial Services  has begun an investigation of the lender practices on force-placed insurance. Gretchen Mortgenson quotes the head of the agency

“Force-placed insurance appears to be the dirty little secret of the mortgage industry,” Mr. Lawsky said in an interview last week. “It is a silent killer harming both consumer and investors while enriching the banks and their affiliates.”

Stay tuned for developments in this investigation.  Mortgenson pointedly notes that the big mortgage lenders “declined to comment” on the inquiry.

What’s not covered

What the homeowner also loses when the bank buys the coverage is the range of insurance protection for injuries that occur on the property, not to the property.  Homeowner’s insurance protects the property owner from claims for slip and fall on the front porch, for example, and for damage or loss to the contents of the house.  You can bet that the bank isn’t paying to protect you from these kinds of loss.

Even if you have decided to walk away from a home that isn’t affordable, keeping liability insurance in place is critical.  Our legal system makes property owners responsible for most accidents that occur on their property.  The property remains yours until title changes as a result of a foreclosure.

So, unless you are willing to have your future shadowed by uninsured claims for injury on property you are shedding, keep a liability policy in place as long as you are the owner.

If you are keeping the property, arrange for your own insurance that protects both you and the bank, at a price that’s fair.

© immortal9000 – Fotolia.com

Is There Such A Thing As An Independent Foreclosure Review?

Jan 5th, 2012
by Cathy Moran.
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Recourse for Illegal ForeclosuresThe form in the mail promised an independent review of your lender’s foreclosure practices.

However, it  looked a lot like come-ons from scammers.

Two clients this week asked if this was real and whether they should sign up.

I read the form and did a little research.  I concluded

One, it is real.

Two, it may not make much difference.

The Federal Reserve has required several misbehaving  lenders and loan servicers to offer borrowers an independent review of their foreclosure. The mortgage servicers subject to the Fed’s enforcement action are

  • GMAC Mortgage,
  • HSBC Finance Corporation,
  • SunTrust Mortgage, and
  • EMC Mortgage Corporation-

The Comptroller of the Currency  regulates another class of lenders, and it has required a foreclosure review of this group of servicers

America’s Servicing Company

 Countrywide National City
Aurora Loan Services EMC PNC
Bank of America Everbank/Everhome Sovereign Bank
Beneficial GMAC Mortgage SunTrust Mortgage
Chase HFC U.S. Bank
Citibank HSBC Wachovia
CitiFinancial IndyMac Mortgage Services Washington Mutual
CitiMortgage Metlife Bank Wells Fargo
Wilshire Credit Corporation 

 

The program offers the prospect of money damages where foreclosure procedures were defective.

The New York Time’s Gretchen Mortgenson is not hopeful.  Her Christmas Day column detailed charges that the “independent” auditors are in bed with the banks they are supposed to be evaluating.

The National Consumer Law Center is likewise skeptical.  NCLC claims the review process may harm homeowners in that it threatens to strip homeowners of their claims with respect to irregularities in the underlying loans.

The servicers subject to review have set up a site to answer questions on the review process.

Letters to eligible homeowners were expected to have gone out in the last two months of 2011.   The application must be returned with a postmark no later than April 30, 2012.

We’ll follow this story as it develops.

Image courtesy of ImageMD.

5 Things That Can Be Done If You Are Behind In Your Mortgage Payment

Jan 1st, 2012
by Doug Jacobs.
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Since the hope of a judicially supervised mortgage modification in bankruptcy seems to have died in the Senate, let’s examine the available options to resolve a mortgage deficiency.

Once you get behind, mortgage arrears can snowball to a point where you can’t just “catch up.”  When that happens, there are 5 things you can do:

1.    List and sell the house. If you can’t make the payments, selling the home pays off the mortgage and may even give you some cash to buy a new home.  This used to be the quick, easy solution, but not in today’s economy.   Houses just aren’t selling and the norm is that you probably owe more than the home is worth.

2.    You can do a short sale.  This requires the mortgage company to accept less than what is due, so that you can sell your house to someone for its true market value.  This will pay the first mortgage, but may not pay a 2nd Mortgage or Line of Credit. And you won’t get anything out of the sale: any money received will go to the realtor, costs of sale and the mortgage company.

3.    You can get a mortgage modification. The mortgage company can reduce the interest rate on your mortgage (thereby lowering your monthly payment); can add arrears to the end of the loan, (so you are not behind anymore); or can even change the amount you owe altogether.  Unfortunately, in spite of the fact that there are federal and state laws that encourage such programs, modifications are scarce.  Lenders have all sorts of conditions placed on the process and there is no legal requirement that anyone be granted a modification.

4.    You can pay the arrearage. Unfortunately, mortgage companies want you to do this all at once.  If you can’t come up with that much in cash, you can seek bankruptcy protection (typically a Chapter 13 bankruptcy) and spread the amount you are behind over several years.

5.    You can walk away and allow the property to be foreclosed. (This is often a much better solution than it sounds, since you get to stay in the house for months rent-free before moving and there will be nothing due to the mortgage company even if they don’t recoup all of the money owed.)

There are advantages and disadvantages to all of the above, and over the next several weeks, we will examine each of these “remedies,” in greater detail.